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KLM-Air France spotlight illuminates SkyTeam probe

The European Court of Justice (ECJ) will on Tuesday (4 July) deliver a timely judgement on objections raised by budget airline Easyjet to a merger between KLM and Air France, which was approved by the European Commission more than two years ago.

It is considered highly unlikely that the ECJ will uphold Easyjet’s objections, since successful challenges to merger approvals are rare in EU case law. But issues raised in the case are likely to reappear in the Commission’s investigation into the SkyTeam alliance between various international airlines including Air France and KLM.

The timing of the Commission’s announcement of the investigation last week (19 June) has aroused suspicions that it is linked to the court case.

The Commission charges that agreements between the nine members of SkyTeam have a “negative effect on competition, which would be against the interest of passengers”. The other members of SkyTeam include Aeromexico, Alitalia, Continental Airlines (US), CSA (Czech Republic), Delta Airlines (US), Korean Airlines and Northwest Airlines (US).

Concerns are focused on a number of routes, which the Commission is not disclosing, where co-operation between SkyTeam members might infringe article 81 of the EC Treaty on restrictive business practices.

“The Commission has launched an investigation. We are puzzled why this should be taking place so late. Why now?” asked Oliver Aust, spokesperson for Easyjet. The inquiry has strong parallels with the objections raised by Easyjet to the KLM-Air France merger. Both raise the issue of reduced competition on routes where allied dominant players run services. Easyjet competes with KLM on its Amsterdam route and with Air France on French routes.

According to one person close to the investigation, it was a “slap on the wrists” by the ECJ that prompted the Commission to launch legal proceedings against SkyTeam members. But, while the investigation does address the issue of route monopolies, its scope would appear to be too narrow to address additional concerns raised by Easyjet over the bargaining power wielded by allied national champions at airports.

“We believe it [SkyTeam] has implications on the whole market and should be looked at from a whole market perspective. The Commission looks at individual routes,” Aust said.

“But, airport charges are the biggest cost factors for an airline. They [dominant players] have huge bargaining power with airports. Easyjet might have shorter turn-around times [and] a very basic terminal at [Paris airport] Charles de Gaulle, but we still pay the same charges, which are likely to be invested in the Air France terminal.”

The Commission is watching the ECJ case closely as it raises issues closely related to the SkyTeam investigation. Bart Koster, spokesperson for KLM, denied a link between the case and the investigation. “The Commission studied the merger and said that if we comply with requirements, it is okay. We have made some slots available for other airlines. As far as we know no other airline has taken them up,” he said.

But Aust said: “It’s not just about a few slots on a few routes. It’s about the dominance you allow to be created when two major players come together. To just wave through the merger was ridiculous. Because they are national flag-carriers with the backing of national governments, the merger was allowed to go through.

“We’re very much in favour of consolidation in the sector, but we thought it [the merger] was a situation where you have dominant players with huge bargaining power. It is not in the best interests of the consumer.”